Which of the following represents an arbitrage transaction?
a. Traders buy silks where they are abundant and cheap, and haul them along a trail to another place where they would be quite scarce and valued.
b. A trader buys a block of government bonds in one market where it is temporarily priced below where it can be immediately resold in a different market.
c. Someone buys a block of Final Four tickets and scalp them at the game.
d. A senior citizen buys a block of theater tickets at a senior discount and scalps them to teenagers behind the theater.
e. All of the above are example of arbitrage.
e
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Suppose, a regulatory agency overseeing a natural monopoly wants to secure consumers a low price without subsidy, while at the same time sustain the firm at zero economic profit. What can the agency do?
a. Set price equal to marginal cost. b. Set marginal revenue equal to marginal cost, and set price based on the demand curve. c. Set price equal to zero. d. Set price equal to average cost.
At which interest rate is the present value of $168.54 two years from today equal to $150 today?
a. 4 percent b. 5 percent c. 6 percent d. None of the above would give a present value within a cent of $162.24.
If the stock of available capital in the economy is running too low, then the:
A. Investment schedule will shift upward B. Investment schedule will shift downward C. Consumption schedule will shift upward D. Consumption schedule will shift downward
e real interest rate is 4 percent a year. When the expected inflation rate is zero, the nominal interest rate is approximately ________ percent a year; and when the expected inflation rate is 2 percent a year, the nominal interest rate is approximately ________ percent a year.
What will be an ideal response?